"More Than Simply Savings: Balancing Budgets with Business Unit Needs"

OceanaGold Corporation

20 October 2010

Lowell Millburn

Procurement & Logistics

TSX, ASX, NZX : OGC

OceanaGold (NZ) Ltd.

Delivering on Sustainable Growth

17 April 2012

Lowell Millburn

National Manager - Procurement & Logistics

Global Choice…Right Source

15th Annual Shared Services Outsourcing Week (SSOW)

Melbourne Convention Centre, Victoria, Australia


[email protected] www.oceanagold.com

Oceana Gold (NZ) Limited

• A subsidiary of Oceana Gold Corporation (OGC: ASX, NZX, TSX)

• Significant Pacific Rim gold producer, with portfolio of operating,

greenfield, exploration assets on the South Island of New Zealand

and the Philippines.

• Macraes Gold Project. New Zealand’s largest gold project-- has

produced 3.0 million ounces of gold since 1990.

• Reefton /Globe Progress. On the West Coast of the South Island,

commissioned in 2007.

• Frasers Underground. Located at Macraes Flat in Central Otago,

commissioned in 2007.

• Annual Production. Averages ~250,000 – 300,000 oz/annum



OceanaGold - Group Procurement Overview (FY 2007-2012)

A Multi-Site Approach

• Integrate BUs Optimise/align procurement, purchasing & logistics

functions via uniform procurement policy, process & planning

• Aggregate Spend. Engage stakeholders. Identify, plan and leverage

spend across exploration, greenfield and operational operations in NZ

• Deep SCM Collaboration. Pursue global suppliers who are creative at

improving materials/service quality, react to demand/delivery upstream.

• Develop Locally . Encourage local vendors to upskill service offerings.

Revised Scope & Mission

• Pricepoint. With GFC, Oceana recognised a need to refine adherence to

pricepoint in relation to quality, continuous supply, process improvement ,

local community development.

• Captive Supply. Work with OGNZL operations to identify/reduce reliance

on tools, materials, service providers which keep OGNZL captive



OceanaGold - Group Procurement .Multi-Site Integration (FY 2007-11)

• Update OGNZL Procurement Policy

• Categorise/Prioritise Capex/Opex

• Identify Uncontracted Spend

• Create Spend Management Plan

• Consolidate Logistics Suppliers

• Reefton, Frasers Sites Commissioned

2007-2008

• Imbed Preferred Provider Ag (PPA)

• Redevelop BOM/Equipment Lists

• Expand Global Supply Chain (Asia)

• Local Community / SD integration

• SCM Tool Integration (ie, Pronto,. . .

. Cognos; Ariba, Fieldglass; XML/EDI?) • Integrate Multi-Site Spend Plans

• Retender High Value Cats (eg,Fuel)

• Identify/Pursue critical/bulk material

• Optimise Site-Based P&L Staff

• Redevelop Contract Suite/Forms

. (Material / Service / FPA/ Site Agmts)

Foundation

Aggregation

2008-2009

Foundation

2007-2009

Foundation

Aggregation

Sustainability

2010-2012

Since 2007, OGNZL has taken a phased

approach to integrating multiple business units

under its centralised, hub and spoke Procurement

model.



NZ Operational Expenditure Aggregating Multi-Mine Requirements



Commercial Activity / Result 2011

NZ Operational Expenditure ~$ 310 M

2011 Contestable Spend (Tendered) $ 54 M

Estimated Savings (Annualised) $ 3.56 M

Annual Savings vs Market 6.6%

Spend on Contract (%) 86%

Spend Directed Locally * 72%

P&L Staff Retention/Training (NZ) 91%

•- Materials and service supply with local, regional base of operations within NZ.

Group ProcurementNZ Operational Results (FY 2011)



Oceanagold understands,

benefits reciporically from the

local & regional synergies it

pursues with South Island

communities.

Through its Preferred

Provider (PPA) program,

OGNZL actively attempts to

progressively nurture a

complex range of goods and

service suppliers within NZ,

especially <100km of its

operations at Macraes,

Frasers and Reefton.

Over 2010/11 preference has

been given to establishing

complex service base

proximate to site (Palmerston,

Oamaru, Reefton, Greymouth,

Westport).

OGNZL Operations – Macraes Flat , Frasers Underground & Reefton/Globe Progress Mines

Developing Local & Regional

Sustainable Supply Synergies

Reefton/Globe Progress

Gold Projects

Macraes Flat/

Frasers Underground

Gold Projects


Preferred Provider Agreements (PPA)

Local/Regional Services Base – Plant Maintenance

• Mining– as an asset intensive industry– is exposed to substantial cost movements when contractors are not properly managed against agreed rates, scope, or standard contract requirements.

• A potential 20% cost movement from unmanaged rates/time = ~$1.8Million [Across 12 primary service providers (2008/9)]

• Preferred Provider Agreements provide a uniform framework for localising spend while reducing risk to unmanaged costs, adherence to policy.


Preferred Provider Agreements (PPA)

Macraes/Reefton Plant Services – PPA Approach

• Process Plant / Fleet Maintenance Contractors (2010/11)

Hydraulics Electrical Mechanical Autoclave/Refractories

• Contractor capabilities/rates review - Local/Regional/InternationalHourly/Role Based Fixed Rate/Lump Sum Contractor Lattitude to scope

• OGL Requirement : Preferred Provider, Site & Master Supply Agreements

Standard Terms Rite to Remove/Deny Entry HSE Compliance

Overtime Incidental Allowances On Call/Standdown

Mileage Uniform Billing/Invoice Travel time

• Intent is to expand PPA Projects to Macraes/Reefton Pit & U/G (2012)



Delivering on

Sustainable Growth


Lowell Millburn

General Manager – Procurement & Logistics

OceanaGold (New Zealand) Ltd.

22 MacLaggan Street

Dunedin 9012 Otago

New Zealand

T: 64 (03) 479-4702

E: [email protected]

Contact Details

"More Than Simply Savings: Balancing Budgets with Business Unit Needs"

Leadership & Management

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